The reinvigorated ownership of Marley Properties is expected to result in a bright future for 19 Crosby Drive in Bedford, a 71,000-square-foot office building. The sale of the property to the Waltham firm was negotiated by CBRE/Whittier Partners principal Gary J. Lemire.
Bedford’s 19 Crosby Drive means different things to different people.
For Barclay S. Henderson, the 71,000-square-foot office building was a troubled investment soured by the difficult economy and inflexible financial terms, forcing the asset’s return to lender LNR Partners just a few years after paying $6.3 million for it in May 1998. The property “was sort of a low point,” Henderson recalled last week after being apprised of its sale to Marley Properties of Waltham. For principal Brett D. Marley, 19 Crosby Drive represents a chance to take advantage of an improving market, and to buy in at a price barely half what Henderson’s group doled out more than seven years earlier.
“I tell people, this is real estate by the pound,” concurred CBRE/Whittier Partners principal Gary J. Lemire, who negotiated the disposition of 19 Crosby Drive on behalf of Miami-based LNR. While declining to provide details, Lemire acknowledged that 19 Crosby Drive traded substantially below replacement cost, largely a reflection of the substantial vacancy in the building, which Marley pegged at about 43 percent.
Despite the inherent risk, and the need for some capital investment, demand for the property was brisk, said Lemire, with private syndicators particularly enthused. The broker cited Marley’s responsiveness for helping win the designation. “They did everything they promised they were going to do,” said Lemire, who teamed up with Philadelphia CBRE principal Peter Stevens in the $3.5 million deal. The sale actually closed about six weeks early, estimated Marley, whose firm made the purchase fresh off its successful repositioning of 204 Second Ave. in Waltham, a 50,000-square-foot office building acquired half vacant last year from Boston Properties but now fully leased.
Besides dabbling in apartments and owners of several retail properties, Marley Properties is targeting the office sector, and 19 Crosby Drive “fits beautifully” in its formula, said Marley, citing a preference for multi-tenanted buildings that benefit from close ownership. “It is a property that really requires hands-on attention and hands-on management, and that’s really what we are about,” he said, with principals of the family-owned firm directly involved in leasing, management and maintenance of the holdings.
Small- to mid-sized tenants mandate greater attention, Marley said, and his firm expects to focus on companies needing between 1,500 to 10,000 square feet of space at 19 Crosby Drive. The main chore will be changing layout to accommodate that clientele, said Marley, who insisted the property can compete for firms interested in a higher level of space than what 19 Crosby Drive had been previously positioned as, that being a Class B property. “It’s a quality building,” he said, estimating its replacement cost at $100 per square foot.
Better Times
In that regard, Marley Properties has the same faith in 19 Crosby Drive as Henderson did when opting to pursue the office market in the late 1990s, buying the building along with a 22,000-square-foot office property in Waltham, 330 Bear Hill Road. Henderson still has the latter investment, having successfully refinanced when the economy darkened in mid-2001. That option was not available for 19 Crosby Drive, however, with the financing provided through a conduit lender and therefore subject to stringent underwriting that did not bend in the face of harsh economic conditions. The problem is being encountered by borrowers throughout the country who relied on conduit lenders as part of the commercial mortgage-backed securities movement, one which has regulatory barriers in place to prevent changes in terms.
“We were just unable to strike a deal with the lender,” explained Henderson, a Cambridge resident whose father founded the Sheraton Hotel chain. The scion has instead focused on the restaurant and retail real estate scene, currently running a successful Southborough operation that owns 10 Wendy’s restaurants in central Massachusetts. As for 19 Crosby Drive, Henderson said the pricing and timing both conspired against a more profitable outcome, but added he does believe in the property long-term. “I wish them well with it,” he said of Marley Properties, adding, “I guess we just should have waited for there to be blood in the streets” before buying, although the non-recourse nature of his $5.12 million loan likely softened the impact of 19 Crosby Drive’s demise.
Looking forward, both Marley and Lemire said they anticipate better times for 19 Crosby Drive due to the reinvigorated ownership, but also as a result of other factors, such as the recent widening of nearby Route 3 and a series of infrastructure upgrades along Crosby Drive itself. Marley noted that such major players as Boston Properties and Equity Office Properties have invested heavily in Bedford, offering both comfort that it is a viable office submarket long-term, and also providing potential spillover prospects from tenants that either do not meet the profiles of the larger buildings, or are coming to support larger companies in the community such as Interactive Data Corp., Progress Software and Boston Communications Group.
After a brutal three years, Bedford certainly does appear to be on the rebound, as witnessed by last week’s leasing of nearly 80,000 square feet at 9 Crosby Drive. Brokered by Meredith & Grew and Cushman & Wakefield, the lease renewal and expansion by Nextel Communications was one of several large deals struck in Bedford of late, including the 80,000-square-foot Affymetrix commitment just cemented at 4G Crosby Drive. And while there are several large blocks of space available, including some 200,000 square feet being peddled by Abbot Laboratories on Crosby Drive, Marley expressed confidence about that thoroughfare and the local office market in general. Waltham has been especially tight, and as leasing opportunities dry up there, tenants will migrate to Bedford and Burlington, said Marley, especially as access continues to improve.
The company is also poised to strike deals, promised Marley, maintaining that its flexible, responsive reputation is appreciated by leasing professionals. “Brokers really enjoy coming to us,” he said. “We’re frequently the first stop on their tour, and we know if we do things right, they won’t even go to No. 2.” The firm is also actively pursuing new real estate investments, he said, with two chief prospects in the New England area on the radar screen at present. Marley also owns assets in Florida and California.
